The prize also has helped to transform one particular ideology into economic orthodoxy. Prof. Mirowski, who is co-writing a book on the history of the economics prize, notes that throughout the 1970s and 1980s, economists whose work supported neoclassical, pro-market, laissez-faire ideas won a disproportionate number of those honours, as well as support from the increasing numbers of well-funded think tanks and foundations that cleaved to the same lines.

People who rejected those ideas, or were skeptical of the natural sciences model, were quickly marginalized, and their road to academic advancement often blocked.

The result was a homogenization of economic thought that Prof. Mirowski believes “has been pretty deleterious for economics on the whole.”

Smith didn't believe that the morality of the market was appropriate for society at large. Honesty, discipline, thrift and co-operation, not consumption and unbridled self-interest, were the keys to happiness and social cohesion. Smith's vision was a capitalist economy in a society governed by non-capitalist morality.

This year, the American Economics Association agreed to set up a committee to investigate whether economists should develop ethical guidelines similar to those already in place for sociologists, psychologists, statisticians and anthropologists.

But there appears to be little enthusiasm for the idea among mainstream economists. Prof. Lucas of the University of Chicago, in an interview with The New York Times, objected: “What disciplines economics, like any science, is whether your work can be replicated. It either stands up or it doesn't. Your motivations and whatnot are secondary.”

Meanwhile, the efficient-markets hypothesis, developed by University of Chicago economist Eugene Fama in the 1970s, has dominated thinking about financial markets. It posits that the prices of stocks and other financial assets are always “efficient” because they accurately reflect all the available information about economic fundamentals.

By this reasoning, there can be no speculative price bubbles or busts in the stock or housing markets, and speculators with evil intentions cannot successfully manipulate markets. Conveniently, since markets are self-stabilizing, there's no need for government regulation of them.

Critics point out that both these theories tend to ignore what John Maynard Keynes called the “animal spirits” – playing down human irrationality, inefficiency, venality and ignorance. Those are qualities that are hard to plug into a mathematical equation that purports to model human behaviour.

These models also have failed to take into account the profound changes wrought by globalization, and the growing importance of banks, hedge funds and other financial institutions. Yet they have successfully provided a “scientific” cover for an anti-regulatory political agenda that is popular on Wall Street and in some Washington political circles

Greg Mankiw had noticed for some years that the students taking his economics class at Harvard University seemed overly concerned about preparing for their careers. This week, things appeared to change.

On Wednesday, about 70 students walked out of Economics 10, the introductory class Professor Mankiw teaches, to protest at what they called a bias towards a destructive brand of free-market economics.

“We found a course that espouses a specific – and limited – view of economicsthat we believe perpetuates problematic and inefficient systems of economic inequality in our society today,” they said in an open letter to him. “There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.”

Prof Mankiw, who served as chairman of George W. Bush’s council of economic advisers and is an adviser to Mitt Romney, the Republican presidential contender, acknowledged that his résumé probably contributed to the decision to target his class, which at 700 students has the highest enrolment of any undergraduate course.

The course, commonly knows as Ec 10, is a requirement for several undergraduate majors and carries a pedigree that is influential even by Harvard standards. Mr Mankiw’s predecessor was Martin Feldstein, who served as chief economic adviser to Ronald Reagan. Larry Summers, the former Treasury secretary and economics adviser to President Barack Obama, acted as a teaching fellow for the course in the 1970s.

The student protesters emphasised the course’s influence, writing: “Harvard graduates play major roles in the financial institutions and in shaping public policy around the world”.

Prof Mankiw told the Financial Times that while he disagreed with the protesters, he had “significant respect” for their activism. He said: “Over recent years, I’ve seen Harvard students becoming increasingly pre-professional. That they are sitting back and thinking broadly about social issues ... those are good questions for students to be asking, and to the extent that Occupy Wall Street sparks debate, that’s good.”

He joins a list of establishment figures targeted or caught in the crossfire around the Occupy Wall Street movement. Two clerics at St Paul’s Cathedral in London have resigned amid debate on evicting protesters from church land, while Jean Quan, the mayor of Oakland, California, is facing demands for a recall election over her handling of a local protest in which police have repeatedly used tear gas and rubber bullets against activists.

Prof Mankiw has written two widely used economics textbooks. In one, he called the idea that tax cuts pay for themselves “fad economics”, a position that raised eyebrows when he joined the Bush administration.

He said he taught “a mainstream economics course” without any political agenda. “I think most students appreciate that.”

By coincidence, the topic of Wednesday’s lecture was income inequality – one of the main complaints of the wide-ranging Occupy protest movement.

An Open Letter to Greg Mankiw

By Harvard Talks Politics

The following letter was sent to Greg Mankiw by the organizers of today’s Economics 10 walkout .Wednesday November 2, 2011

Dear Professor Mankiw—

Today, we are walking out of your class, Economics 10, in order to express our discontent with the bias inherent in this introductory economics course. We are deeply concerned about the way that this bias affects students, the University, and our greater society.

As Harvard undergraduates, we enrolled in Economics 10 hoping to gain a broad and introductory foundation of economic theory that would assist us in our various intellectual pursuits and diverse disciplines, which range from Economics, to Government, to Environmental Sciences and Public Policy, and beyond. Instead, we found a course that espouses a specific—and limited—view of economics that we believe perpetuates problematic and inefficient systems of economic inequality in our society today.

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory.

Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course—and the only other eligible class, Professor Steven Margolin’s class Critical Perspectives on Economics, is only offered every other year (and not this year). Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class—or the whole discipline of economics—as a method of expressing discontent.

Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

We are walking out today to join a Boston-wide march protesting the corporatization of higher education as part of the global Occupy movement. Since the biased nature of Economics 10 contributes to and symbolizesthe increasing economic inequalityin America, we are walking out of your class today both to protest your inadequate discussion of basic economic theory and to lend our support to a movement that is changing American discourse on economic injustice. Professor Mankiw, we ask that you take our concerns and our walk-out seriously.

Sincerely,

Concerned students of Economics 10

Quelques commentaires intéressants sur le sujet.

·Theories based on assumptions of rationality, efficiency and equilibrium in the marketplace are likely to be treated with a great deal more skepticism.

·Homo economicus is a lot more anxious, irrational, unpredictable and complex than most economists believed. And, as Adam Smith recognized, he has a moral and ethical dimension that should not be ignored.

·In 2010, the Academy Award-winning documentary Inside Job exposed several disturbing examples of academic economists calling for deregulation while working for financial-services companies. And in a study of 19 prominent financial economists, published last year by the Political Economy Research Institute at the University of Massachusetts Amherst, 13 were found to own stock or sit on the boards of private financial institutions, but in only four cases were those affiliations revealed when they testified or wrote op-eds concerning financial regulation.

·Perry Mehrling, a professor of economics at New York's Columbia University, is the chair of the curriculum task force at INET. He says his graduate students at Columbia are growing increasingly frustrated by at the tendency to define the discipline by its tools instead of its subject matter – like the students in Paris a decade ago, they find little relationship between the mathematical models in class and the world outside the door.

·Last month, the International Monetary Fund's Independent Evaluation Office issued a remarkable report. The report quite clearly blamed the IMF for failing to recognize the factors leading up to the worst economic crisis since the Great Depression and to provide warning to its members so that preventive actions could be taken.

The report noted that several prominent economists had clearly warned of the dangers facing the world economy prior to the collapse that began in 2007. One of these economists was Raghuram Rajan, who was actually the chief economist at the IMF when he gave a clear warning of growing financial fragility back in 2005. Yet these warnings were for all practical purposes ignored when it came to the IMF's official reports and recommendations to member countries.

·"The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes."

But unfortunately the IMF's practice still does not match its rhetoric or even, increasingly, its own research. In Greece, Ireland, Spain, Portugal, Latvia and other countries, the Fund is still involved in the implementation of "pro-cyclical" policies that will keep these countries from recovering for a long time. For Greece, Ireland, and Latvia, for example, it will be 9-10 years before they reach their pre-crisis levels of GDP.

There is absolutely no excuse for this, from an economic point of view. Any policies that require this kind of extended period of unemployment and stagnation are by definition wrong.

·Among those practitioners are the free market economists at prestigious universities and institutions whose predictions have been so wildly off the mark, and the financial wizards who espouse the ideals of capitalism but have actually twisted and compromised those ideals at trading desks and boardrooms across the world. As they sold the conventional wisdom that a rising tide lifts all boats, the reality is that most of us have been pushed under water by a wave of surging income and wealth inequality.

Princeton economic historian Harold James believes that trust in economic predictions has been broken, and it's not hard to see why.

In the free market utopia, markets are supposed to allocate efficiently, self-correct, and bring ever greater prosperity to all, if only regulators would get out of the way of rational financial actors.

But just as in that other, now-discredited utopian system (communism), the ideology and the reality had little connection to each other.

What we have seen in the disaster of the past few years is that getting out of the way allowed a small fraction of the elite to get very rich by making extremely risky bets.